The NZD/USD pair edged higher in early Asian trading on Thursday, hovering near the 0.5900 mark. The New Zealand Dollar found support following stronger-than-expected Q1 Retail Sales data, which signaled improving consumer demand in response to recent interest rate cuts. Retail sales rose 0.8% quarter-on-quarter, only slightly lower than the previous 0.9% increase, reflecting sustained momentum in domestic spending. The data, released by Statistics New Zealand, has helped lift sentiment toward the Kiwi, especially given its close economic ties to China.
US Dollar Faces Mixed Signals Ahead of Fed Speeches
Meanwhile, the US Dollar is trading with a cautious tone despite upbeat S&P Global PMI data earlier in the week. The Composite PMI rose to 52.1 in May, with both the Manufacturing and Services indices improving to 52.3, suggesting resilience in the US economy. However, the Dollar’s upside is being capped by a retreat in long-term Treasury yields and growing concerns about the US fiscal outlook following the passage of President Donald Trump’s “One Big Beautiful Bill” in the House of Representatives.
Federal Reserve Governor Christopher Waller added to the uncertainty by noting that fiscal policy remains a key watchpoint for markets. He suggested that if tariffs stay elevated around 10%, economic strength in the second half of the year could still allow for rate cuts. Markets are now pricing in a roughly 71% probability that the Fed will hold rates steady at its next two meetings, according to the CME FedWatch tool.
Market Outlook
With risk sentiment improving and New Zealand data showing resilience, the NZD is drawing modest demand. However, the Kiwi’s gains could be limited by broader USD dynamics, especially as traders await comments from Fed officials Alberto Musalem, Jeff Schmid, and Lisa Cook later on Friday for fresh policy cues.
Technically, a sustained move above 0.5900 could open the path toward resistance near 0.5940. On the downside, initial support lies around 0.5860. Overall, while the short-term outlook favors mild Kiwi strength, Fed commentary and global risk appetite will be critical in determining further direction.
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